T-Mobile in Talks to Carry Huawei Smartphone

T-Mobile USA Inc. is in talks to distribute Huawei Technologies Co.'s new Google-powered smartphone this holiday season, a person familiar with the matter said.

It's uncertain whether the discussions between the fourth-largest U.S. mobile carrier and the Chinese telecom-equipment maker will bear fruit, but a deal for Huawei's first smartphone for U.S. consumers could be inked in four to six weeks, the person said.

An agreement would give Huawei an opening into the U.S. wireless market and T-Mobile a low-cost smartphone that it could use to lure in customers who might otherwise look elsewhere.

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Visitors explore Huawei's pavilion at a telecommunications conference in May in Russia. The Chinese electronics company has been eager to push into the U.S. market.
Xinhua/Zuma Press

The new phone, dubbed the Ideos, could be cheap enough that carriers could sell it for $50, said IDC analyst William Stofega.

Huawei has been trying to sell the phone to major U.S. cellular carriers and says it's getting strong interest. "It's safe to assume we're talking to all of the major carriers," said Jannie Luong Nguyen, a spokeswoman for Huawei's U.S. business.

Huawei is better known for making telecom-network equipment, a market where it has used aggressive discounts to become one of the top three vendors by sales. But the company has ambitions to become a player in the consumer market as well, and Huawei executives appear to be using the same low-price strategy to win over smartphone buyers.

The Chinese company's efforts to crack the U.S. network equipment market via acquisitions or by winning contracts have been frustrated by security concerns. It backed out of a plan to buy networking-gear maker 3Com in 2007 when the deal faced opposition form a U.S. security panel.

Riley Repko, a senior advisor working on cyber operations for the U.S. Air Force, says the U.S. government's concerns about Huawei's networking gear should also be applied to its nascent cellphone business.

"The federal government needs to think long and hard and move slowly," said Mr. Repko, a former executive with Oracle Corp. and Siebel Systems Inc. "We need to take a closer look."

Some corporations will also be concerned, said Chris Wysopal, chief technology officer of computer security consultant Veracode.

"If you look at a device like the BlackBerry, I know the U.S. government has gone over that with a fine-tooth comb, and that makes me feel good," said Mr. Wysopal. "With these new devices from Huawei, I don't think big enterprises will use it unless someone has shown there is a security review."

Huawei has a big hill to climb in the consumer market. It claimed a tiny 0.2% share of the smartphone market on a global basis, according to IDC.

Yet its low-cost strategy dovetails with the needs of many carriers that are looking to expand smartphone sales and the lucrative data-service contracts they bring to customers who aren't willing to pay for marquee devices such as Apple Inc.AAPL-0.87%'s iPhone or Verizon Wireless's Droid lineup. Those high-end devices typically retail for more than $500 without a contract, or $200 with a two-year contract.

The Ideos, which was unveiled Thursday at an electronics show in Berlin, will have a recommended retail price of $100 to $200 without a contract, adding pressure on entry-level smartphones.

The Ideos uses Android 2.2, the latest version of Google Inc.'s free mobile operating system; features a 2.8-inch touch screen; and acts as a Wi-Fi hotspot, allowing other devices to connect to the Internet.

Mr. Stofega, the IDC analyst, said the Ideos will likely be priced under $100 in the U.S., possibly as low as $50. "What's really significant is that this is the democratization of the smartphone," Mr. Stofega said.

T-Mobile USA, which had 33.6 million subscribers at the end of June, has carried Huawei products in the past. Last year, it offered a plug-in "stick" for laptops to connect to wireless Internet.

Also last year, T-Mobile USA sold a Huawei phone called the T-Mobile Tap that didn't feature the Huawei brand. The Ideos carries the Huawei brand on the back of the phone.

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